Nigeria’s inflation story took a notable turn in November 2025. Headline inflation eased sharply to 14.45% year-on-year, down from 16.05% in October, according to data from the National Bureau of Statistics (NBS) for November 2025.
The 160 basis-point decline marks the eighth consecutive month of disinflation, signaling a sustained slowdown in headline price growth.
For financial markets, the easing inflation rate is significant. Lower inflation improves real returns and reshapes investor preferences across asset classes.
As price pressures moderate, risk-free government securities become more attractive in real terms, raising the return benchmark for equities and prompting investors to reassess where risk is best rewarded in a stabilizing inflation environment.
What this means for fixed income
The most immediate impact of easing inflation is seen in the fixed-income market.
With inflation at 14.45% recent Nigerian Treasury Bills (NTBs) clearing at 17.2–17.3% now offer positive real returns of roughly 2.7–2.9%. This marks a major shift from previous periods when investors accepted negative real yields in exchange for safety.
This renewed appeal is reinforced by structural liquidity in the system.
- Pension Fund Administrators (PFAs) hold about 60% of their assets in government securities, while banks continue to increase investments in fixed-income instruments, supported by the retention of the 30% liquidity ratio. Together, these factors point to sustained demand for government paper.
The strong demand at recent NTB auctions reflects investors’ willingness to lock in yields, underpinned by expectations that inflation will continue to moderate, and real returns will remain positive.
What this means for equities
Easing inflation improves macro stability, but the bigger shift for equities is the rise in attractive risk-free returns. With government securities now offering 17% plus yields, equities face a higher benchmark for performance. Investors are no longer compelled to take equity risk purely as an inflation hedge.
This environment favours selectivity over broad market rallies. Stocks with strong cash flows, sustainable dividends, and balance-sheet strength are better positioned, while speculative and low-earnings stocks face valuation pressure as the opportunity cost of holding equities rises.
Within the equity market, banks and insurance companies appear to have a good outlook for investors.
Their large holdings of government securities mean higher yields feed directly into investment income, supporting earnings. Easing inflation also helps stabilize asset quality and underwriting conditions.
As a result, financial stocks are emerging as equity beneficiaries of the fixed-income rebound, offering earnings visibility and dividend support in a high-yield, disinflationary environment.
Bottom line
Inflation easing to 14.45% marks an important turning point, but it does not signal an end to price pressures.
Instead, it represents a shift into a more balanced and more selective investment environment.